Society teaches us that we all need to become homeowners. Doing so, they say, will lead us to a place of wealth and abundance.
But when you actually go through the motions, you soon discover that that’s not the case. Yes, house prices rise over time. But you also have to maintain them. And that eats into the wealth generation process. So you wind up with much smaller returns over the course of decades.
Renting, though, is “money down the drain” right?
You’ll Have To Pay For Maintenance And Upkeep
Well, not so fast. For one, you’re getting a roof over your head – something you need if you want to make money effectively in the world. But you also avoid all the usual maintenance costs. And that can save you thousands of dollars every year.
Did you know that the average homeowner spends around 1 to 3 percent of the value of their property on upkeep annually? That’s a vast sum of money – up to $6,000 per year on a $200,000 home.
If you are already paying maintenance or can’t afford it, sites like IBuySD.com might be able to help. If you’re living in a house that’s become a liability, then sell it as fast as you can and cut your losses. Then use the capital you free up to invest in productive assets. Stocks and shares are a good start.
You’ll Miss Out On Opportunities To Make More Money
Buying a house commits you to taking out a mortgage. And, over time, this saps your income and keeps you poor. Think about the amount of interest you pay to banks. It’s tremendous. This money could be something that you direct into the markets. But instead, you’re losing income in the form of interest, just to put a roof over your head.
In the short term, paying a mortgage doesn’t seem like a big deal. But over the long run, it sets you back financially. And that means you’ll have less in your savings by the time you reach middle age.
You’ll Have To Deal With House Price Crashes
House price crashes in the future are not guaranteed. But if you look at the data honestly, they seem highly likely. Currently, house prices are higher than ever before relative to wages. You can see this on a chart at fred.stlouisfed.org. And they will need to come back down to Earth soon if they are to remain affordable.
Interest rates can’t rise at the moment for economic reasons. So house prices are going to continue to inflate away. But once rates start going up – perhaps by 2030 – the game will change. Suddenly people will discover that their properties aren’t worth as much as they thought they were. Values will go down, and individuals will have paid all that money into their mortgages for no reason.
Buying a house isn’t a route to wealth, but selling it could be. If you want to make money, you need to learn to divert your wealth into productive assets. Regular housing isn’t one of them.
I live in a small Georgia town that you most likely have never heard of and I LOVE it! My house is more than full as I am a single mother of four & caregiver to my aging mother and uncle. Lover of all things Outlander. Goes to the beat of her own drum woman.